Safeguard Your Clients’ Retirement

Discuss these five questions with your retiree and preretiree clients to make sure they are financially secure.

By Preeti Vasishtha

Most advisors don’t always counsel their clients about some critical risks that could impact their financial security in retirement, according to a recent study by LIMRA.

“While most advisors are very conscientious about managing their clients’ assets in retirement, many may not address some of the key issues that could jeopardize their clients’ long-term financial well-being,” says Marie Rice, corporate vice president and director of LIMRA Retirement Research.

“Basic retirement planning should include addressing things like: when a client should retire, planning expenses and income in retirement, ordering assets from which withdrawals should be made, and planning any required minimum distributions.” Forty-two percent of retirees said that their advisors provide advice on these specific issues.

The report, Positioning Assets in Retirement, surveyed individuals aged 55-80, who have been retired for one to 10 years and have $200,000 in household investable assets. LIMRA researchers found that fewer than four in 10 retirees have some sort of plan that mitigated the risk their money would run out during their retirement, and nearly 25 percent have more than $100,000 in debt.

Help them prepare
Here are five questions you can ask your pretiree and retiree clients to help you plan a secure retirement plan for them.

When should the client retire? Typically, people decide to retire five years before they actually retire. The decision should not be made without considering all the financial implications, including health-care coverage and other benefits, current financial obligations and how those obligations will be met. You should make sure that preretirees have a contingency plan in case of unforeseen events, such as a layoff or an illness.

How should the client plan for his expenses and income? You can help your clients identify their monthly and annual expenses, as well as possible additional unplanned expenses they will have in retirement. Develop a strategy to create income sources (pension, savings withdrawals, Social Security benefits, annuity payouts, etc.) that will pay for clients’ expenses while protecting their long-term financial security.

Which funds should the client draw from first? Most people understand the importance of diversifying their financial portfolio, but when it comes to deciding how to convert their savings into income, many need advice to ensure they are making wise choices—considering tax implications and long-term investment strategies.

What required minimum distributions should the client perform and when? As part of their financial portfolio, many retirees invest in various types of annuities to continue to grow their savings. But some annuities have required minimum distributions. It’s important for you to tell your clients when these distributions need to occur to avoid certain penalties and adjust their finances to minimize the taxes that need to be paid.

What risks should the client plan for when he retires? LIMRA research has shown that retirees aren’t always aware of all the possible risks they face in retirement. You can help your clients protect themselves from risks, such as longevity, illness, inflation and market volatility that could compromise their financial security.

“Our research has found that less than half of retirees have a written retirement plan to ensure their financial security throughout their retirement,” Rice says. “We hope these questions will inspire retirees and their advisors to develop a plan that will enable the retirees to live comfortably for the rest of their lives.”